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  • US dollar recovery, Lira sell-off knocks-off EUR/USD closer to 1.1400
  • Focus on Eurozone construction output and Bundesbank monthly report for fresh trading impetus.

The EUR/USD pair extended its gradual Asian decline into Europe and hit fresh daily lows just ahead of the 1.14 handle amid a solid recovery seen in the US dollar across the board.

At the press time, the spot hovers near the daily lows of 1.1404, as the bears return to markets amid worries over the Italian fiscal spending, following reports that Italy’s populist government is considering a ‘Marshall Plan’ of up to EUR 80 billion to revamp the country’s infrastructure after the Genoa bridge collapse.  

Meanwhile, the greenback regained footing against its major peers, as the Turkish Lira resumed its decline following the bold comments from the country’s President Erdogan, which could once again escalate tensions between the US and Turkey. Also, reports of gunshots fired at the US embassy in Ankara spooked sentiment and boost the bid tone around the buck, in turn adding to the weight on the common currency.

Looking ahead, the losses in the major could be capped by the rally in the 10-year German bond yields, which are up nearly 4% at 0.316%. However, any recovery in the pair is likely to be short-lived, as the US dollar is expected to retain ground heading into the FOMC minutes due later this week. In the meantime, FOMC member Bostic’s speech and broader market sentiment will drive the moves in the major.

EUR/USD Technical Levels

Slobodan Drvenica at Windsor Brokers, notes: “The pair is riding on the fourth corrective wave of a five-wave cycle from 1.1745 (31 July high), which should ideally end here, before broader bears continue. Dip and close below 5SMA (1.1385) is needed to confirm and re-focus 1.1300 support, loss of which would open way towards 1.1186 (Fibo 61.8% of 1.0340/1.2555 rally). Alternatively, break above  1.1470 Fibo  resistance  would signal extended recovery and expose very strong barrier at 1.1540 (base of the weekly cloud, reinforced by Tenkan-sen line). Res:  1.1445; 1.1470; 1.1509; 1.1540. Sup:  1.1410; 1.1385; 1.1366; 1.1335.”